Correlation Between Eldorado Gold and NiSource

Can any of the company-specific risk be diversified away by investing in both Eldorado Gold and NiSource at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eldorado Gold and NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eldorado Gold Corp and NiSource, you can compare the effects of market volatilities on Eldorado Gold and NiSource and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eldorado Gold with a short position of NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eldorado Gold and NiSource.

Diversification Opportunities for Eldorado Gold and NiSource

-0.45

Correlation Coefficient

Eldorado Gold  NiSource

Very good diversification

The 3 months correlation between Eldorado and NiSource is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Eldorado Gold Corp and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and Eldorado Gold is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eldorado Gold Corp are associated (or correlated) with NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Eldorado Gold i.e., Eldorado Gold and NiSource go up and down completely randomly.

Pair Corralation between Eldorado Gold and NiSource

Considering the 90-day investment horizon Eldorado Gold Corp is expected to under-perform the NiSource. In addition to that, Eldorado Gold is 2.74 times more volatile than NiSource. It trades about 0.0 of its total potential returns per unit of risk. NiSource is currently generating about 0.26 per unit of volatility. If you would invest  3,294  in NiSource on September 2, 2024 and sell it today you would earn a total of  515.00  from holding NiSource or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Eldorado Gold Corp  vs.  NiSource

Eldorado Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eldorado Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Eldorado Gold is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NiSource

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eldorado Gold and NiSource

The main advantage of trading using opposite Eldorado Gold and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eldorado Gold position performs unexpectedly, NiSource can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NiSource will offset losses from the drop in NiSource's long position.

The idea behind Eldorado Gold Corp and NiSource pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.